Voluntary Separation Program (VSP)

Q Invest has established a dedicated hotline for advice regarding these types of programs. Call 1800 997 683 to speak to an Adviser. Please be aware that a standard fee for the advice appointment will apply.

Click here to download our VSP Fact Sheet.

The Voluntary Separation Program (VSP) will be available to targeted non-frontline service employees in the Queensland Public Service from July 2011. It will provide a lump sum severance payment (as well as other accrued entitlements) to those who receive, and accept, an offer to leave their current employment.

When making the decision to accept or refuse an offer, it will be important to not only know the details, but also think about the next phase of your life and how you will support your financial needs.

Employer payments and superannuation benefits

There will be three types of benefits to consider - a severance payment for loss of employment, accrued annual and long service leave and superannuation entitlements.

If qualifying criteria are met, the formula for calculating the severance payment is a base payment and an additional payment calculated on years of service (details available from your employer).

Severance payments for loss of job

The lump sum severance payment from your employer is considered to be an Employment Termination Payment (ETP). The tax rates for the taxable component of this payment for 2011/2012 are as follows:

Age at end of financial year	Tax component	Tax rate
Under 55	Tax Free	0%
	Taxable	First $165,000 at 31.5% then 46.5%
55 and over	Tax Free	0%
	Taxable	First $165,000 at 16.5% then 46.5%

Note: A tax-free component exists if the recipient has ‘pre July 1983 service’ or an ‘invalidity component’.

The employer will normally deduct these rates of tax from a severance payment and, for the VSP program, there will be no opportunity to roll the ETP into superannuation. These amounts will however impact on a final year tax assessment and other government benefits or payments that relate to taxable income. Seeking tax advice may be advisable.

Accrued annual and long service leave

Accrued annual leave, along with any long service leave entitlements, will also be available as a lump sum. These payments will have tax payable on them and they cannot be rolled into superannuation or salary sacrificed. For more information visit www.ato.go.au

Superannuation

Under the VSP, superannuation is treated in the same way as for a resignation.

There will be a cash value (which can be accessed) and a preserved amount (that can only be accessed under certain conditions). A quote from your super fund should provide you with a breakdown of tax components and tax payable on withdrawal of the cash value.

If a person is aged between 55 and 59, access to the total superannuation balance will depend on an intention to work in the future. Tax may still apply to withdrawals, but at least $165,000 will be tax-free in 2011/2012. For people aged over 60 and below 65, super is generally available tax-free when leaving an existing employer or where there is no intention to work again. For those aged over 65, superannuation is already available even if still working and is tax-free.

Visit www.qsuper.qld.gov.au or contact QSuper for further information or to arrange a quote of your superannuation benefits.

Personal circumstances

An offer of a VSP requires serious consideration. For some the choice may be easy, particularly if they are keen to move on to a new phase of their life. For others, financial commitments, job security and long term income needs might result in a decision not to accept an offer.

Ongoing financial support is still required even without a regular salary and will need to be sourced from either new employment, a partner’s income, investments and savings, superannuation (if possible) or Centrelink options (e.g. Newstart or Age Pension).

Leaving employment may also affect the insurance held inside a super fund. If a person has an existing account with QSuper and start a new job they can usually make QSuper their fund of choice.

Q Invest has established a dedicated hotline for advice regarding these types of programs. Call 1800 997 683 to speak to an Adviser.